Has The Yangon Stock Market Bottomed Out?

We do not normally highlight short-term big moves in local markets given how volatile frontier markets can be, but the move in Myanmar’s Yangon Stock Exchange is worth monitoring at the moment. The Myanmar Stock Price Index (MYANPIX) has jumped almost 18% over the past week and is up 24.5% on the year.

This is a marked change from how the market has been trading since its launch in March 2016. The market had basically halved in value last year, with issues that we highlighted in a previous post. The index had shown no indication of improving in 2017, especially with foreign investors still officially prohibited from investing in the market (although there have been reports of foreigners using local proxies to invest). However, the abrupt move over the past couple weeks has come out of the blue and sticks out on the chart:

We are almost 32% up from the lowest point the index traded, when it closed at 539.42 on 30 Jan, 2017.

First Myanmar Investment Co Is Taking Off

Given that only 4 stocks make up the entire exchange, it is easy to find out what is driving this move. While Myanmar Thilawa SEZ Holdings (MTSH) is up about 17% from the lows, the move is clearly being driven by the first and largest company on the exchange: First Myanmar Investment Co (FMI). Since trading in a 13,500-14,000 range for all of January, it has jumped 40% in the last two weeks to a 21,000 close last week.

What could be driving this move?

One piece of big news has been that the groundbreaking ceremony for Myanmar’s largest every foreign property development happened on February 16. The Yoma Central Project is worth an estimated $700 million, and FMI has a 12% stake in it. The Peninsula Hotel is also featured here, and FMI has a 6% stake in that as well. The project is supposed to be completed in 4 years and had faced a significant amount of delays before this, so it is possible this is the main catalyst for FMI’s recent rise.

It is also worth noting that due to how illiquid the market is, this could just be a case of the stock breaking through key levels and offers disappearing. Over 7000 shares were traded on 3 March, the most since last June, with an average of roughly 2000 shares being traded daily in 2017. It is very possible that the price comes back to earth soon once liquidity is restored.

Foreign Investors Still On The Outside Looking In

Despite the launch of the largest foreign property investment project in Myanmar this year, foreign investors are still barred from trading in the stock exchange for now. Currently, the government seems to be very hesitant to allow this, as brokers are not even allowed to trade on mobile trading platforms, forcing in person visits to brokerage firms. However, a revision to the Local Company Law allowing greater ownership of local companies by foreigners is expected this year, which will add some needed liquidity and bids to a stock market that is treading water.

Until that happens, we remain skeptical that the market can rally significantly back to even initial opening levels. But once the market opens, we would be very interested in looking at investments on the Yangon Stock Exchange.